30 Years Later

Last night I turned the radio on to hear a pleasant-sounding male voice, a middle-aged Chinese man telling the story of when former paramount leader Deng Xiaoping decided on Gai Kaifang or "reforms" and "openness" 30 years ago.

The host went on to energetically describe "Xiaoping's" visit to the southern city of Shenzhen in 1992 when he made his famous trip there and the evidence of his success in building China into what it is today.

While this is the 30th anniversary of reform and opening up, there isn't much to celebrate these days.

Many factories in southern China are closing, hundreds of thousands of factory workers laid off, stocks on a downward spiral and property prices plunging.

China had been enjoying double-digit growth for the past five years and now the government will be lucky if the country manages to pull of 8 percent GDP growth, but some economists outside of China are adjusting their figures to even 5 or 6 percent.

The heavy dependence on exports is a huge problem, but one the government thought would make China resilient if another Asian financial crisis happened.

But today we're seeing an even greater situation, one that requires global effort to control in some way.

While China says it will stimulate its economy with a 4 trillion RMB ($856 billion) package, it's mostly for infrastructure projects, many of which were already underway. So far there isn't much new in there.

The government asked cities and provinces to put in proposals of how to spend the money, and the Chinese capital even had the gall to put forward projects worth some 1 trillion yuan when some $40 billion was already spent on preparing for the Olympics that ended only a few months ago.

What the central government should really do is spend on health care, education, pensions and social housing. Only when people feel social systems are sound and working for their benefit will they feel confident enough to loosen their purse strings a bit.

The Chinese have always been extremely good savers. But that was mostly out of necessity because there aren't much in the way of pensions, socialized health care and education. When people visit the hospital or doctor, they have to pay up front. In cash. And then there's the alleged corruption that happens in hospitals...

During this economic downturn, the government should take this opportunity to look at all its state-owned enterprises, its management of agricultural and industrial sectors and start trimming the fat. This was already started in the Jiang Zemin era, but it really needs to happen even more now.

Businesses should be looked at and inefficiencies taking out, processes streamlined to be more efficient and less people doing more work (as most places are currently too bloated with too many employees and not enough to do).

But this isn't going to happen.

Instead the government will do all it can to keep as many people employed as possible, even if it means propping up inefficient companies clumsily lumbering along. Beijing is too scared to see more people out of work; President Hu Jintao has called for "moderate prosperity" so he has to deliver it... somehow.